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Partially directed search in the labor market

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  • Wu, Liangjie

Abstract

I study the labor market implications of an equilibrium search model with flexible degrees of information availability, which nests the random and directed search models as special cases. Workers have limited information about the payoffs of applying to different firms. Firms use wages to attract workers and mediate externalities among applicants. Limited information interacts with the allocative role of wages, leading to new predictions. Reducing information friction has non-monotonic impacts on efficiency. When the cost of acquiring information is low (high), alleviating the information friction reduces (exacerbates) the distortion in the market equilibrium. I then apply this model to discuss the implications of improvements in information technology and the spillover effects among workers in the labor market.

Suggested Citation

  • Wu, Liangjie, 2024. "Partially directed search in the labor market," Journal of Economic Theory, Elsevier, vol. 220(C).
    • Handle: RePEc:eee:jetheo:v:220:y:2024:i:c:s0022053124000644
    DOI: 10.1016/j.jet.2024.105858
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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